Consumer confidence within Western Australia has slumped to near record lows with the closure of high-profile businesses on the east coast and the prospect of higher interest rates rattling households.
Consumer confidence within Western Australia has slumped to near-record lows with the closure of high-profile businesses on the east coast and the prospect of higher interest rates rattling households.
Following a post-federal election surge in consumer confidence during the December quarter, perceptions on the short-term and long-term outlook for the state’s economy have fallen back to the record lows recorded in September last year.
The Curtin Business School and Chamber of Commerce and Industry WA March quarter Survey of Consumer Confidence found just 27 per cent of households expected the WA economy to improve over the next 12 months, down from 48 per cent in the previous quarter.
Short-term expectations also deteriorated, with 12 per cent expecting the economy to improve over the next three months, down from 19 per cent in December.
The number of households expecting weaker conditions in the next three months also doubled to 30 per cent.
“Consumers have become increasingly worried about their personal situation following news of several high-profile business closures on the east coast,” CCI chief economist John Nicolaou said.
The survey was conducted close to the time Toyota announced it would be following Holden and Ford in closing its manufacturing operations in Australia.
“Consumers are less optimistic about their job prospects and despite several years of focusing on shoring up their financial position, the renewed economic uncertainty has caused households to be more concerned about their own finances,” Mr Nicolaou said.
The report noted that consumers had “switched off” from the property market, with attitudes towards buying conditions hitting a near four-year low.
Just 28 per cent of respondents felt it was a good time to buy property, down from 40 per cent in December.
Two-thirds, 66 per cent, of households expected interest rates to be higher by February next year, which the survey stated could have a “dampening effect” on the otherwise buoyant housing market.
Forty per cent of respondents said they would be less likely to purchase property if interest rates were higher, and 45 per cent said they would be less likely to take on debt.
The Reserve Bank of Australia left the cash rate unchanged at 2.5 per cent during its latest meeting on March 4.
Governor Glenn Stevens reiterated his stance of providing “a period of stability in interest rates”, despite saying “some indictors of business conditions and confidence have shown improvement”.
The RBA next meets on April 1.
Meanwhile, Westpac’s Institute Index of Consumer Sentiment declined 0.7 per cent in March to 99.5 per cent.
The Index has fallen 10.9 per cent from its November peak of 110.3, and is at its lowest level since May last year.
Senior economist Matthew Hassan attributed the initial decline in sentiment to the “unwinding of the election-related sentiment boost”, with more recent falls coming from the “run of ‘bad news’ around the motor-vehicle industry, other manufacturers and Qantas”.
The index noted consumers reported a sharp drop in their assessments of whether now is a good time to buy a dwelling.
The ‘time to buy a dwelling’ index dropped 6.7 per cent in March and is now down 16.8 per cent from its September high.
The drop has taken the Index below its long-run average for the first time since August last year.
“This likely reflects deteriorating affordability due to higher prices and a shift in expectations for interest rates,” Mr Hassan said, adding the February survey showed most consumers expected interest rates to rise over the next 12 months.
